Washington, D.C. 20549
TOP SHIPS INC.
1 VAS. SOFIAS & MEG.
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):_______.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ________.
Attached as Exhibit 1 to this Report on Form 6-K is Management’s Discussion and Analysis of Financial Condition and Results of
Operations and the unaudited interim condensed consolidated financial statements and related notes thereto for TOP Ships Inc. (the “Company”), as of and for the six months ended June 30, 2022.
Matters discussed in this report may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995, or
PSLRA, provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals,
strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
The Company desires to take advantage of the safe harbor provisions of the PSLRA and is including this cautionary statement in
connection with this safe harbor legislation. This report and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial
performance. When used in this report, the words “anticipate,” “believe,” “expect,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “continue,”
“possible,” “likely,” “may,” “should,” and similar expressions identify forward-looking statements.
The forward-looking statements in this report are based upon various assumptions, many of which are based, in turn, upon further
assumptions, including without limitation, management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although the Company believes that these assumptions were reasonable when
made, because these assumptions are inherently subject to significant uncertainties and contingencies that are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations,
beliefs or projections.
In addition to these assumptions and matters discussed elsewhere herein and in the documents incorporated by reference herein, important
factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the following:
Any forward-looking statements contained herein are made only as of the date of this report, and except to the extent required by
applicable law or regulation we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time, and it is not possible for us to predict all or any of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause
actual results to be materially different from those contained in any forward-looking statement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
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TOP SHIPS INC.
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(registrant)
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Dated: September 27, 2022
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By:
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/s/ Evangelos J. Pistiolis
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Evangelos J. Pistiolis
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Chief Executive Officer
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
The following management’s discussion and analysis is intended to discuss our financial condition, changes in financial condition and
results of operations for the six months ended June 30, 2021 and 2022, and should be read in conjunction with our historical unaudited interim condensed consolidated financial statements and related notes included in this filing. For additional
background information please see our annual report on Form 20-F for the year ended December 31, 2021 filed with the Securities and Exchange Commission, or the Commission, on April 15, 2022.
This discussion contains forward-looking statements that reflect our current views with respect to future events and financial
performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth in the section “Risk Factors” included in our Annual Report on Form 20-F filed
with the Commission, on April 15, 2022.
We are an international owner and operator of modern, fuel efficient eco tanker vessels focusing on the transportation of crude oil,
petroleum products (clean and dirty) and bulk liquid chemicals. As of June 30, 2022, our fleet consisted of one 50,000 dwt product/chemical tanker, the M/T Eco Marina Del Ray, five 159,000 dwt Suezmax tankers, the M/T Eco Bel Air, M/T Eco Beverly
Hills, M/T Eco West Coast, M/T Eco Malibu and M/T Eco Oceano CA, and two 300,000 dwt VLCC tankers the M/T Julius Caesar and M/T Legio X Equestris. We also own 50% interests in two 50,000 dwt product/chemical tankers, M/T Eco Yosemite Park and M/T
Eco Joshua Park.
We intend to continue to review the market in order to identify potential acquisition targets on accretive terms.
We believe we have established a reputation in the international ocean transport industry for operating and maintaining vessels with
high standards of performance, reliability and safety. We have assembled a management team comprised of executives who have extensive experience operating large and diversified fleets of tankers and who have strong ties to a number of national,
regional and international oil companies, charterers and traders.
Non-US GAAP Measures
This report describes Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA), which is not a
measure prepared in accordance with U.S. GAAP (i.e., a “Non-US GAAP” measure). We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, other operating loss, operating lease expenses, vessel impairments, gains on
sale of vessels and gains/losses on derivative financial instruments.
Adjusted EBITDA is a non-U.S. GAAP financial measure that is used as a supplemental financial measure by management and external users
of financial statements, such as investors, to assess our financial and operating performance. We believe that this non-U.S. GAAP financial measure assists our management and investors by increasing the comparability of our performance from period
to period. This is achieved by excluding the potentially disparate effects between periods of interest, gain/loss on financial instruments, taxes, depreciation and amortization, other operating losses, operating lease expenses, gains on sale of
vessels and vessel impairments, and which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect results of operations between periods and other
items that the Company believes are not indicative of the ongoing performance of its core operations.
This Non-U.S. GAAP measure should not be considered in isolation from, as a substitute for, or superior to financial measures prepared
in accordance with U.S. GAAP. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our definition of Adjusted EBITDA may not be
the same as reported by other companies in the shipping industry or other industries. Adjusted EBITDA does not represent and should not be considered as an alternative to operating income or cash flow from operations, as determined by U.S. GAAP.
Reconciliation of Net (Loss) / Income to Adjusted EBITDA
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Six months ended June 30,
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(Expressed in thousands of U.S. Dollars)
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2021
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2022
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Net (Loss) / Income
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1,682
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8,605
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Add: Operating lease expenses
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5,378
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5,378
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Add: Vessel depreciation
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3,339
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6,114
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Add: Impairment on vessels
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1,160
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-
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Add: Interest and finance costs
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2,837
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6,927
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Add: Loss / (Gain) on financial instruments
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(66
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)
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-
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Less: Gain on sale of vessels
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-
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(78
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Adjusted EBITDA
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14,330
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26,946
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For additional information please see our annual report on Form 20-F for the year ended December 31, 2021 filed with the Securities
and Exchange Commission, or the Commission, on April 15, 2022, “Item 5. Operating and Financial Review and Prospects”.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
The following table depicts changes in the results of operations for the six months ended June 30, 2022 compared to the six months
ended June 30, 2021.
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Six Month Period Ended June 30,
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Change
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2021
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2022
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June 30, 2021 vs June 30, 2022
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($ in thousands)
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$
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%
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Revenues
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25,310
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38,846
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13,536
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53
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%
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Voyage expenses
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608
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875
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267
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44
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%
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Operating lease expenses
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5,378
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5,378
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-
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0
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%
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Other vessel operating expenses
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7,919
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9,705
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1,786
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23
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%
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Vessel depreciation
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3,339
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6,114
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2,775
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83
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%
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Management fees-related parties
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1,661
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1,030
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(631
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-38
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%
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Dry-docking costs
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26
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-
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(26
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-100
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%
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General and administrative expenses
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963
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691
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(272
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)
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-28
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%
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(Gain) on sale of vessels
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-
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(78
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(78
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100
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Impairment on vessels
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1,160
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-
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(1,160
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100
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%
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Operating income
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4,256
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15,131
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10,875
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256
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%
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Interest and finance costs
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(2,837
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(6,927
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(4,090
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144
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%
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Gain on financial instruments
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66
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-
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(66
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-100
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%
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Equity gains in unconsolidated joint ventures
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197
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401
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204
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104
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%
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Total other expenses, net
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(2,574
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(6,526
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(3,952
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154
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%
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Net income
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1,682
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8,605
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6,923
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412
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%
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Period in Period Comparison of Operating Results
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1. |
Revenues, Voyage expenses, Depreciation and Other vessel operating expenses
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Revenues, Voyage expenses, Depreciation and Other vessel operating expenses increased due to the increase in the number of vessels
employed over the two comparable periods. During the six months ended June 30, 2021, we employed on average 6.8 vessels, whilst in the same period of 2022 we employed on average 7.9 vessels, which resulted in increases in all vessel related
revenues and expenses as well as vessel depreciation. This increase in the average number of vessels (16%) is not entirely representative of the percentage increase in revenues and vessel related expenses since in deadweight terms the increase is
100%, due to the fact that in the first half of 2022 we took delivery of three 3 large crude carriers (adding 757,000dwt to the fleet) and we sold two MR tankers and another in Q3 2021 (removing 150,000dwt from the fleet). Because larger vessels
command higher rates and incur higher voyage, operating and depreciation expenses the percentage increase of each of these categories between the two comparable periods is higher than the respective percentage increase in the average number of
vessels employed.
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2. |
Management fees—related parties
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During the six months ended June 30, 2022, management fees to related parties decreased by $0.6 million, or 38%, compared to the same
period in 2021. This decrease was mainly due to a decrease of $0.8 million relating to sale & purchase commissions as per our management agreement with Central Shipping Inc (“CSI”), a related party affiliated with the family of Mr. Evangelos J.
Pistiolis, offset by a $0.2 million increase in management fees relating mainly to the increase of the number of vessels in our fleet.
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3. |
Interest and finance Costs
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During the six months ended June 30, 2022, interest and finance costs increased by $4.1 million, or 144%, compared to the same period
in 2021 mainly due to:
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An increase of $1.9 million in interest and finance costs relating to the accelerated amortization of deferred financing fees of the two vessels sold in the six
months ended June 30, 2022 and of the Central Mare Bridge Loan prepaid in the same period (please see the Unaudited Interim Condensed Consolidated Financial Statements for the six months ended June 30, 2022 – “Note - Debt” included
elsewhere in this document).
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A decrease of $0.7 million in interest capitalized in the vessels under construction in the six months ended June 30, 2022 when compared with the same period in 2021
mainly due to the completion of our newbuilding program in the first quarter of 2022.
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An increase of $1.4 million in interest and finance costs mainly relating to the increase of the weighted average debt outstanding from $137.5 million in the six
months ended June 30, 2021 to $239.2 million in the same period of 2022.
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Finally this increase was also due to an increase of $0.1 million in other financial costs.
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4. |
General and administrative expenses
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During the six months ended June 30, 2022, our general and administrative expenses decreased by $0.3 million, or 28%, compared to the
same period in 2021, mainly attributed to a decrease of $0.1 million in legal and consulting fees and expenses, a decrease of $0.1 million in directors and officers insurance cost and a decrease of $0.1 million in auditor fees.
Recent Developments
On July 5, 2022 we redeemed 865,558 Series F Shares and paid $10.4 million to Africanus Inc.
In July 2022, 5,229,000 pre-funded warrants were exercised for 261,450 common shares, and in September 2022, 4,374,000 pre-funded
warrants were exercised for 218,700 common shares.
On September 23, 2022 we effected a 1-for-20 reverse stock split of our common stock. There was no change in the number of our
authorized common shares, or the floor price of our Series E Shares, or the number of votes of our Series D, E and F Shares. All numbers of common share and earnings per share amounts, as well as warrant shares eligible for purchase under our
warrants, exercise price of said warrants and conversion prices of our Series E Shares, in this report have been retroactively adjusted to reflect this 1-for-20 reverse stock split.
B. |
Liquidity and Capital Resources
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Since our formation, our principal sources of funds have been equity provided by our shareholders through equity offerings or at the
market sales, operating cash flow, long-term borrowing and short-term borrowings. Our principal use of funds has been capital expenditures to establish and grow our fleet, maintain the quality of our vessels, comply with international shipping
standards and environmental laws and regulations and fund working capital requirements.
Our business is capital intensive and its future success will depend on our ability to maintain a high-quality fleet through the
acquisition of newer vessels and the selective sale of older vessels. Our practice has been to acquire vessels using a combination of funds received from equity investors, bank debt secured by mortgages on our vessels and funds from sale and
leaseback agreements. Future acquisitions are subject to management’s expectation of future market conditions, our ability to acquire vessels on favorable terms and our liquidity and capital resources.
As of June 30, 2022, we had an indebtedness of $244.5 million, which after excluding unamortized financing fees amounts to a total
indebtedness of $248.4 million (please see the Unaudited Interim Condensed Consolidated Financial Statements for the six months ended June 30, 2022 – “Note - Debt” included elsewhere in this document). As of June 30, 2022, our cash and cash
equivalent balances amounted to $18.3 million, held in U.S. Dollar accounts, $4.0 million of which are classified as restricted cash.
Working Capital Requirements and Sources of Capital
As of June 30, 2022, we had a working capital deficit (current assets less current liabilities) of $18.4 million.
Our operating cash flow for the remainder of 2022 is expected to increase compared to the same period in 2021, as we believe the
contribution of the two VLCC and one Suezmax tanker we have taken delivery of during the first quarter of 2022, respectively will more than compensate the cash contribution from one MR Tanker we sold in August 2021 and the two MR Tankers we sold in
February 2022.
In our opinion, will be able to finance our working capital deficit in the next 12 months with cash on hand and operational cash flow
(please see the Unaudited Interim Condensed Consolidated Financial Statements for the six months ended June 30, 2022 – “Note - Going Concern” included elsewhere in this document).
Cash Flow Information
Unrestricted cash and cash equivalents were $8.4 million and $14.3 million as of June 30, 2021 and 2022 respectively.
Net Cash from Operating Activities.
Net cash provided by operating activities increased by $4.6 million, during the six months ended June 30, 2022 to $13.9 million,
compared to $9.3 million for the six months ended June 30, 2021.
Net Cash from Investing Activities.
Net cash used in investing activities in the six months ended June 30, 2022 was $143.1 million, consisting of $216.6 million of cash
paid for advances for vessels under construction, offset by $72.1 million net proceeds from sale of vessels and $1.4 million of return of investments in unconsolidated joint ventures.
Net Cash from Financing Activities.
Net cash provided by financing activities in the six months ended June 30, 2022 was $141.0 million, consisting of $156.2 million of
proceeds from long term debt, $8.6 million net proceeds from equity offerings, $47.6 million from proceeds from issuance of series F preferred stock, offset by $61.1 million of prepayments and scheduled repayments of long term debt, $6.9 million
dividends to preferred shares and $3.5 million payments of financing costs.